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When to use Put Options

Put Options can make you a lot of money when the market or stock is trending down, trading below moving average or breaking through it. Another tool is the MACD, look for its peaks of stock charts.

Below is an example of a stock that is breaking through support. The stock is trading at $99, if we sold it and bought it back when it got to $81 we would make $7 or about 7% profit.

However, if we bought the right to buy the stock at $100 or the put for $4 and when it got down to $81 sold it for $20.

Let's Show You The Money

$20-$4=$16 0r 400%



WOW! A return of 400% vs. 8%. Puts have such high profits if you use the strategy correctly and get out of loosing trades fast! You may be able to gain without being correct 60% or the time. Let's say you put a stop at 50% so you can only lose half of the money invested.

You are right just 40% of the time and your average win is 150%.

Let's Show You the Equation

($1.5)*(.4)-($.5)*(.6)=$.30

This means on average you would make $.30. However, you must first paper trade before you put any real money into the market. Never enter the market with money you cannot afford to lose.



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